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The 2011 FSB peer review on compensation indicated that good progress has been made in implementing the FSB Principles and Standards on Sound Compensation Practices (“Principles and Standards”), but that more work is necessary to overcome constraints to full implementation by individual national authorities and to address concerns by firms of an uneven playing field. Following the completion of the peer review, the Financial Stability Board (FSB) was tasked by the G20 to undertake ongoing monitoring and public reporting on further progress in compensation practices.
In order to strengthen its monitoring in this area, the FSB has recently established the Compensation Monitoring Contact Group (CMCG), a network of national experts from member jurisdictions with regulatory or supervisory responsibility on compensation practices. The CMCG is responsible for monitoring and reporting to the FSB on national implementation of the Principles and Standards.
In addition, the FSB has established a mechanism for national supervisors from FSB member jurisdictions to bilaterally report, verify and, if necessary, address specific compensation-related complaints by financial institutions that give rise to level playing field concerns. The objectives of the Bilateral Complaint Handling Process (BCHP) are to:
- Address evidence-based complaints raised by firms to their home supervisors that document a competitive disadvantage as a result of the inconsistent implementation of the Principles and Standards by firms headquartered in other jurisdictions.
- Produce and report information to the FSB on the nature and outcomes of such complaints so as to inform the scope and intensity of the ongoing monitoring.
The BCHP is intended to complement and reinforce normal bilateral or multilateral supervisory channels that may be used by supervisors to address compensation issues. The outcomes of the BCHP will be reported by the CMCG to the FSB as part of its ongoing monitoring process.
Information on the FSB’s implementation monitoring activities of compensation practices is available on a dedicated page of the FSB website that can be accessed at the following link: http://www.financialstabilityboard.org/activities/compensation/cm.htm
